AM Best

Best’s Market Segment Report: AM Best Maintains Stable Outlook on Japan Non-Life Insurance Market


Jason Shum
Associate Director, Analytics
+852 2827 3434

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Al Slavin
Communications Specialist
+1 908 439 2200, ext. 5098


HONG KONG - OCTOBER 05, 2022 08:55 AM (EDT)
AM Best is maintaining its stable market segment outlook on the Japan non-life insurance segment given recent profitable underwriting performance and the likelihood carriers will maintain positive results in the face of expected economic headwinds.

In a new Best’s Market Segment Report, “Market Segment Outlook: Japan Non-Life Insurance,” AM Best notes that Japan’s economic recovery continued in fiscal year 2021, although certain business segments still faced pressures. Over the next 12 months, it remains to be seen how the unfolding situation in Ukraine; elevated commodity prices; the possibility of economic slowdown in several of Japan’s trading partners; and the development of the COVID-19 pandemic at home and abroad will impact the country’s economy.

“Given the underwriting risk profile of most domestic non-life insurers–which is skewed toward voluntary automobile and fire insurance–AM Best considers the earnings base of Japan’s non-life insurance companies to be sustainable,” said Jason Shum, associate director, analytics, AM Best.

Over the near term, despite expectations of strong underwriting profitability, AM Best is of the view that underwriting results for most major domestic non-life insurers will retreat moderately for fiscal year 2022. While AM Best expects premium revenue to increase, mainly driven by fire, personal accident and other specialty insurance, it is probable that underlying underwriting profit will contract from a higher loss ratio for voluntary automobile insurance. Potentially higher loss ratios for business lines, such as personal accident and marine, could also impact insurers’ underwriting profitability, albeit to a lesser extent.

Given the increase in catastrophe occurrences in recent years, most major non-life companies in Japan recognise the need to raise the profitability and sustainability of their fire insurance products. Other than transferring some of the reinsurance cost hikes to policyholders, several major insurers have also sought to improve their understanding of the potential impact of climate risk.

Non-life insurance companies in Japan continue to contend with investment challenges amid the volatile domestic and global capital markets. However, the majority of domestic non-life companies have very strong capital positions. The solvency capital of the Japanese non-life insurance segment, which represents the level of real net assets available for regulatory solvency purposes, remains very large compared with the regulatory capital requirement. In addition, the amount of excess solvency margin held by most domestic insurance companies is

sizable relative to the value of equities and foreign securities, which suggests that there is a significant amount of excess capital available to cushion against market volatility.

To access the full copy of this market segment report, please visit .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.